Riyadh seeks fair oil price

Riyadh: Saudi Arabia yesterday identified $75 (Dh275.25) a barrel as a fair price for oil, the first time in years the world's leading crude exporter has cited a price target.

"We see the fair price of oil as $75 per barrel," Saudi Arabia's King Abdullah Bin Abdul Aziz was quoted as saying in an interview published by Kuwaiti newspaper Al Seyassah.

The Saudi oil minister also identified $75 a barrel as a fair price for oil, the first time in years the kingdom has cited a price target.

Ali Al Naimi said in Cairo before a meeting of Opec ministers that oil prices needed to return to $75 to keep the more expensive new projects at the margins of world supply on track. "There is a good logic for $75 a barrel," said Naimi. "You know why? Because I believe $75 is the price for the marginal producer. If the world needs supply from all sources, we need to protect the price for them. I think $75 is a fair price."

The Saudi comments are likely to come as a relief to major oil consumer countries hoping Opec will not seek to push crude prices back towards $100 barrel during a recession.

Opec yesterday deferred a decision on a new supply cut amid signs that Saudi Arabia and its Gulf allies are demanding tighter adherence to restraints agreed in the past two months.

Gulf ministers said they wanted to see strict compliance with two recent output curbs before considering further cuts when the Organisation of Petro-leum Exporting Countries meets next in Algeria on December 17.

"Compliance I think is OK," said Kuwaiti Oil Minister Mohammad Al Olaim. "But the market conditions require us to be 100 per cent compliant."

Opec's first priority is to put a floor under a near-$100 collapse in oil prices to $55.

The Saudi price target will serve as a useful reference point for traders when world oil demand starts to emerge from the current recessionary slump. But for now, the oil market is focused on whether Opec can avoid the sort of divisions that sometimes have plagued past efforts to prop up prices during a downturn.

"$75 a barrel doesn't look doable in the short term," said analyst Raja Kiwan of PFC Energy. "Given the fractious nature of Opec on quota compliance, they may have some problems."

Delegates said Riyadh and Kuwait and the UAE wanted to be sure others in the 12-member group were sharing the burden of the reductions before committing to further restraints.

One delegate identified Iran's efforts as a particular source of concern.

Al Naimi said that Saudi Arabia's compliance with its share of the combined 2 million barrels a day (bpd) of cuts agreed in September and October was "very high."

Saudi-owned Al Hayat newspaper quoted an Opec source as blaming a lack of restraint by some countries for having "a negative effect on oil prices."

Opec may need to make larger cuts to balance the decline in demand among Western economies that has caused inventories to swell.

"Some of us cannot sell our crude," said Opec president